–Here is how deficit reduction really works

Mitchell’s laws:
●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor,
which leads to civil disorder.
●Cutting the deficit is the government’s method for taking dollars from the middle class and giving them to the rich.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

●The penalty for ignorance is slavery.
Here is how deficit reduction really works:

The Government Doesn’t
Have Enough Dollars

Monetary Sovereignty

So send us some of yours

Monetary Sovereignty Monetary Sovereignty Monetary Sovereignty

Cut food stamps . . . Cut Social Security . . Cut Medicare
Widen the gap between the rich and the rest of us

Rodger Malcolm Mitchell
Monetary Sovereignty

Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99%

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports


18 thoughts on “–Here is how deficit reduction really works

  1. It’s like being at a football game on a freezing day. One team scores a touchdown, but the touchdown cannot be noted on the scoreboard, since the scoreboard operators claim that the scoreboard has suddenly “run out of points.”

    The game is halted until the spectators chip in money to buy more points, in addition to the admission fee they already paid. If spectators have no extra money, then must pay for points by giving up their jackets and blankets, plus anything edible they have.

    As the game continues, all the items extracted from spectators are burned in dumpsters outside the stadium.

    If any spectator asks why he must pay for the scoreboard to have more points, especially if all the items are destroyed, then the other spectators attack him, saying, “there’s no free lunch,” and “scoreboard points don’t grow on trees.”

    A handful of spectators know that all the spectators have been robbed, and that some are freezing to death. However most of this handful don’t care about physical consequences of the theft. They say the scoreboard operators simply “misunderstand” scoreboards.


  2. Roger, you sound like an MMTer. If one visits the New Economic Pespectives website, you will understand a lot more. Or, if you just like to watch and listen, just plug Stephanie Kelton’s name into YouTube. Stephanie is the Queen of MMT. She teaches so well (an economics professor at University of Missouri at Kansas City). Economists like Stiglitz and Krugman have been won over by the MMT economists. The whole Fiscal Cliff/National Debt debates are a load of crap. Let’s leave those behind and rebuild this country. Even Ben Bernanke is starting to get it. He just needs to move a little further, and we’ll have it made.


    1. Thanks Bayard,

      If you scroll through this blog, you’ll see I’ve corresponded with Warren Mosler and Randy Wray et al for many years — even spoke at one of Randy’s classes.

      Please do not believe that you and I “get it,” but the President of the United States, the Secretary of the Treasury, the Chairman of the Fed, the 535 members of Congress, the media and all the experts surrounding these people do not “get it.”

      They “get it” — just as well as we do. Maybe better.

      However, they are paid by the upper .1% income group not to admit it. The upper .1% wants deficit reduction, because that widens the income gap between them and the 99.9%.

      So they bribe the politicians (via campaign contributions) and the media (via ownership and advertising) to lie about it.

      The only people who really don’t get it are the members of the public. They have been brainwashed into thinking the government is running out of money, and is so poor, the people must send their own money to Washington.

      It’s not a matter of ignorance for the politicians. It’s a matter of greed and dishonesty.


      1. Oh, Rodger, I do get it. We live in a democratic form of autocracy, called a Plutocracy, where the wealthy and powerful are the ruling, for lack of a better word, “junta” which controls everything, from media to agriculture, from our defense to our absurd security state. Believe me, I get it. They won’t do anything which upsets their plutocratic apple cart, which means that we get crumbs, while they eat cake (ala Marie Antoinette in late 18th century France). We are in a “civil war,” but rightly worried about making it violent, especially after we heard about the government’s hollow point ammunition purchase, mid year. We are fed nothing but garbage, lies and misdirection from every major media source. I personally believe that we are at the end of our rope as a country. We we now have military occupation of about 80% of the world’s nations, and total global domination. The only reason why he rest of the globe (much of it anyway) continues to do business with us is that we own most of them. We (America) has become the last great plutocratic imperialist super power, and will preside over the collapse of humanity. I know that this sounds very negative, but without some major change in the near future, it is an absolute truth.


        1. BAYARD WATERBURY WRITES: “Stephanie Kelton is the Queen of MMT.”

          Unfortunately Ms. Kelton is among the MMT people who insist that the 1% and their puppet politicians innocently “misunderstand” national finances. This is inexcusable.

          BAYARD WATERBURY WRITES: “Economists like Stiglitz and Krugman have been won over by the MMT economists.”

          Wow. Please provide a web kink to prove that Krugman agrees with MMT. Krugman likes to besmirch MMT by making claims such as this:

          “Right now, deficits don’t matter — a point borne out by all the evidence. But there’s a school of thought — the MMT people — who say that deficits never matter, as long as you have your own currency. For the record, it’s just not right.”


          This is a deliberate misrepresentation of MMT by Krugman. Yet the MMT people think Krugman simply “misunderstands” MMT.

          Krugman is a “deficit dove” — i.e. someone who talks out of both sides of his mouth, and thinks that this makes him seem clever. Deficits don’t matter, but they do. The U.S. government has a debt and deficit crisis, but we should wait until the economy is stronger, and then cut the deficit, so we can fall back into a recession. And so on.

          If Krugman seems to agree with MMT, it is only because his gimmick is double-speak.

          BAYARD WATERBURY WRITES: “Even Ben Bernanke is starting to get it. He just needs to move a little further, and we’ll have it made.”

          Bernanke is fully aware of the truth, as was Greenspan. However Fed chairmen are useless, since they work for Wall Street and for the big banks.

          Thank you for commenting. Please continue to do so.


      2. Roger, I know you say that they get it and maybe a few of them do, but I really think a lot of people just don’t get it. I consider myself better informed than average, but I didn’t get it until a year or so ago when I started reading you and NEP, don’t remember in what order. I recently had a chance to tell a relative about MMT and MS. He is very smart, very well informed on things, a liberal/progressive and very politically active and he didn’t get it. He said: you’d have to raise taxes to spend, you’d have to cut other things, we can’t just print money there would be inflation. Just like pretty much everybody does when they encounter this, and I answered each one in turn and referred him to your site and NEP. Now he will check it out and start to get it. You and the NEP folks are starting to break through the noise machine. Stephanie Kelton had an oped piece in the LA Times today.


  3. The lies continue:

    Washington Post:

    U.S. will hit debt limit on Dec. 31, Treasury Department says
    By Zachary A. Goldfarb, Updated: Wednesday, December 26, 4:22 PM

    The U.S. government will exhaust its borrowing authority on Monday and hit the $16.4 trillion federal debt limit, the Treasury Department said Wednesday, beginning a countdown until Congress either passes legislation to allow for more borrowing or the government defaults on its debt.

    To begin conserving money, Treasury will suspend a program on Friday that helps states and localities manage their borrowing.

    In subsequent weeks, Treasury will start to<b. tap the federal worker pension fund for additional financial resources.

    Do you really believe that President Obama, the Chairman of the Fed, the Secretary of the Treasury, the 535 members of Congress, all their expert economists and assistants, and the popular media around the nation — not one of these people — “understands” that the federal government cannot run short of dollars if it chooses not to?

    And yet I’ve had people doubt that the upper .1% income group is paying for this “service.”


    1. “Do you really believe that President Obama, the Chairman of the Fed, the Secretary of the Treasury, the 535 members of Congress, all their expert economists and assistants, and the popular media around the nation — not one of these people — “understands” that the federal government cannot run short of dollars if it chooses not to?”

      Yes I do Rodger… why is this so hard to believe?

      wiki Abstraction (Mathematics): “Abstraction in mathematics is the process of extracting the underlying essence of a mathematical concept, removing any dependence on real world objects with which it might originally have been connected (ie govt is household), and generalizing it so that it has wider applications or matching among other abstract descriptions of equivalent phenomena….. The main disadvantage of abstraction is that highly abstract concepts are more difficult to learn, and require a degree of mathematical maturity and experience before they can be assimilated.”

      They all do not possess this cognitive ability sufficient to do their current jobs and should be fired or better resign… no need to start with the conspiracy theories and accusatory teeth gnashing if what we really have is a problem with mathematical cognition…. you could probably simply design a certain math cognition test and be able to predict if they could understand monetary systems at all or easily…

      rsp, Matt


      1. There is nothing abstract about U.S. government finances. The facts are so simple that children can understand them (since children’s heads have not yet been filled with garbage).

        It is wishful thinking to claim that politicians, bankers, Treasury people, etc “misunderstand” national finances. It is a fantasy.


  4. Just when you think you respect the U.C Irvine, out comes another idiot:

    LA Times:
    Letters: Deficits, spending and the ‘fiscal cliff’, December 25, 2012
    Re “Forget the “fiscal cliff,'” Opinion, Dec. 21

    Professor Stephanie Kelton provides one of the most bizarre pieces of economic analysis I have ever encountered to justify deficit spending as a tool to stimulate economic recovery.

    She points to a historic correlation between periods of balanced budgets and the onset of depressions and draws the conclusion that balanced budgets and surpluses harm the economy. She provides no economic explanation for why this should be so, yet she quickly jumps to her main conclusion that therefore deficits must help the economy.

    In fact, each depression has its own unique set of causes, mostly unrelated to the government’s prior fiscal position.

    Kelton also misstates the basic linkage between spending and job creation, which should read: income creates spending, spending creates sales, sales create jobs and jobs create income.

    Dennis J. Aigner

    Laguna Beach

    The writer is a professor emeritus of economics and management at UC Irvine.

    Excuse me, professor, but has it ever occurred to you that when a nation runs a negative balance of trade (which the U.S. is and generally does) along with a balanced budget, money is leaving the economy?

    And when a government reduces deficits, that has a negative effect on income.

    That’s the “economic explanation you so desperately are searching for.

    (Really, is this so difficult? But I can see why today’s economists are so addled, if this guy is an example of yesterday’s economists.)


    1. No ability to abstract mathematically Rodger, like you write here: “idiot”… sad for him really…. I’ll use this as an example here.

      If this guy has a cognitive deficiency in mathematics that is exemplary, it would probably not be the best idea to approach this current widespread ignorance as some sort of “conspiracy”.

      The solution to eliminate/arrest a criminal conspiracy is QUITE DIFFERENT than one to eliminate/arrest a cognitive deficiency… if you can see what I mean…

      Im tellin’ ‘ya, These people are all dumb/morons/idiots just like this guy from Laguna … that is where the current evidence leads.



    2. Matt, this is not a question of understanding or IQ points. These folks of whom you speak, frankly my good man, don’t give a damn for truth. They have no value for truth, since it simply does their position a serious disservice. They understand everything, but the truth is working against their position and their supporters who hold all of the financial cards (i.e. wealth). They are only interested in their own proposed reality, which in our world is some what or absolutely fantastic. No, Matt, you need to become more of a cynic, and understand that these guys are about power, period, end of story. They don’t care who their fantasies hurt, because, for certain, everyone who is hurt therefrom is no friend of theirs.


      1. But Bayard,

        Is not what you are proposing somewhat teleological? ie You are ascribing a “purpose” for their actions of which at the same time you believe they are not aware of? If you can see what I mean…

        iow You cant say that they are unaware of the truth (idiots) and at the same time committing fraud. “Fraud” requires foreknowledge which they do not ever exhibit…

        wiki: The broad spectrum of consequentialist ethics, of which utilitarianism is likely the most well-known, focuses on the end result or consequences, with such maxims as utilitarian philosopher John Stuart Mill’s “the greatest good for the greatest number”, or the maximum utility. Hence they are teleological in nature. ”

        What you assert is a sort of “reverse maximum utility”; or perhaps “minimum utility” ie “utility” for the 1%. If this concept is unscientific/false in the one direction then it has to be false in the other direction too…

        I dont believe in the teleological “Invisible Hand” as a force for good or bad…

        What we are witnessing can only be explained scientifically via cognitive science, and we know from cognitive research that people possess differing amounts of mathematical cognitive abilities…

        They do not possess the necessary cognitive ability (certain math abilities) to discern truth in this matter… ie they are stupid.

        My views here I admit are not cynical but rather I assert scientifically skeptical…



    3. Thanks, Rodger. Dennis is living proof that if we are steeped in too many theories which we hold to be irrefutable fact, we can’t see beyond them. Every real academe understands that each paradigm of their profession must remain always open to question. Stephanie, in her brillian article, makes non-standard economic arguments, and very valid arguments. She obviously leaves Dennis in a cloud of the dust of his exploding synaptic functions. He really needs to get out more.


    1. I may be alone in my thinking here but I believe many are ignorant and many are “evil” and we don’t know which is which. It is possibible to both be very intelligent and at the same time be ignorant in certain subjects.

      Excellent artcile by the way Rodger, this is exactly how I would frame it. Maybe also show a poor schlub handing over his hard earned money to pay for more taxes.


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